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Mitt Romney's opponents have slapped Bain Capital over layoffs, but private equity actually has little overall effect on job numbers. Instead, the crimes of such companies are centered on the way they make money, writes James Surowiecki in the New Yorker. What we should be concerned about is the companies' "financial gimmicks" that score profits "not from management or investing skills but, rather, from the way the US tax system works." At the heart of the problem are the "special dividends" that such firms have taken on in recent years.

The firms have recently-purchased companies borrow extra money; that money is used to pay the private-equity fund. "These dividends created no economic value—they just redistributed money from the company to the private-equity investors," Surowiecki notes. Then, if the company goes under, the fund has still made money. What's more, "taxpayers are left on the hook": Government cash can help protect the private-equity funds if their companies struggle, and money that flows to the fund is taxed as capital gains, not income. Click through for the full piece.

Great piece on this issue on DemocracyNow today, as part of a discussion about the new film, We Are Not Broke: http://www.democracynow.org/2012/1/24/as_romney_releases_tax_returns

MDD

Jan 24, 2012 11:28 AM CST

Just watch the first Wall Street movie (1987). Romney is not far from a Gordon Gekko.

Republicans-R-Dumb

Jan 24, 2012 11:20 AM CST

Republicans are too dumb to understand this. It's like what they did in Good fellas to the Restaurant owner you know no matter what !#!#@ pay me. Legal gangster capitalism at it's finest. But the Republicaly challenged are too dumb to figure it out. If they did 99% of them wouldn't be Republicans anymore.